Three Insurance Coys Submit List of Debtor Brokers to NAICOM
Written by Patience Saghana
Monday, 06 October 2008
Only three insurance companies have been bold enough to submit list of insurance brokers that are indebted to them to the National Insurance Commission (NAICOM) in spite of plea by the commission for insurers to come forward on brokers’ debts.
The Commissioner for Insurance, Mr. Fola Daniel, who disclosed this in Abeokuta recently, could not understand why insurance companies were afraid to submit list of debtor insurance brokers for the commission to take appropriate action on them.
The reluctance of insurance companies to release the list to the commission may not be unconnected with the fear of how the commission could treat such sensitive matter.
Insurance brokers are said to owe insurance companies about N50 billion with utmost disregard for ‘No Premium, No Cover’ provision in the Insurance Act 2003.
The provision which allows insurance brokers to collect premiums from clients and pay to the underwriting companies is being exploited by brokers who sometimes withhold premiums and in other cases, pay piece meal to insurers.
Section (1) of the 2003 Insurance Act states that “the receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk, unless the premium is paid in advance.”
It also states, “an insurance premium collected by an insurance broker in respect of an insurance business transacted through the insurance broker shall be deemed to be premium paid to the insurer involved in the transaction.”
Chief Dede Ijere, president of the Nigerian Council of Registered Insurance Brokers (NCRIB), said the provision of the act was not practical explaining that the premium are most time difficult to collect from clients.
According to him, “the law seems impracticable under the Nigerian situation despite its good intentions. While brokers make every efforts to collect premiums from their clients, insurance companies are busy castigating brokers for collecting premiums and not remitting it to them.”
He said, ”the problem with the industry is that we pretend to lack the understanding of how the system operates. Underwriters know very well that premiums have not been received, but they keep on pressurising the brokers to pay premiums. How can a broker remit a premium he has not collected? To some extent the provision has worked, but it has not really worked effectively and efficiently.”
Worst still, insurance companies are not helping NAICOM to assist in collecting the premium not remitted by brokers if the commission do not know which broker owes which company. But some of the chief executive who spoke under cover to Financial Vanguard, FV, said “You cannot dare to come out to say this broker owes this company because it is a brokers’ market and if a company offend one broker, all other brokers will gang up against that company. So, you can see that insurance companies are helpless in this situation.”
He said that most of the premium not remitted to insurance companies has actually been paid but “who dares to ask but to hope and pray that the broker would remit the premium some day. I believe that they may be investing these premiums in some of the instruments in the money market. But this is unethical because the law specified certain percentages of the premium income that insurance companies must invest in specific areas in the economy,” he said.
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